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February 28, 2017
  • Government National Mortgage Association
  • Chief Financial Officer
  • Housing
2017-FO-0005
2017-FO-0005.pdf

In accordance with the Chief Financial Officers Act of 1990, as amended, we are required to annually audit the consolidated financial statements of the U.S. Department of Housing and Urban Development (HUD). HUD reissued its fiscal year 2016 and 2015 (Restated) consolidated financial statements due to pervasive material errors that were identified by us. Our objective was to express an opinion on the fairness of HUD’s consolidated financial statements in accordance with U.S. generally accepted accounting principles applicable to the Federal Government. This report presents our reissued independent auditor’s report on HUD’s fiscal years 2016 and 2015 (Restated) consolidated financial statements, including an update to our report on HUD’s internal controls. 

The total amount of errors corrected in HUD’s notes and consolidated financial statements were $516.4 billion and $3.4 billion, respectively. There were several other unresolved audit matters, which restricted our ability to obtain sufficient, appropriate evidence to express an opinion.These unresolved audit matters relate to (1) OGC’s declination of signing the management representation letter; (2) HUD’s improper use of cumulative and first-in, first-out budgetary accounting methods of disbursing community planning and development program funds; (3) the $4.2 billion in nonpooled loan assets from Ginnie Mae’s stand-alone financial statements that we could not audit due to inadequate support; (4) the improper accounting for certain HUD assets and liabilities; and (5) material differences between HUD’s subledger and general ledger accounts. This audit report contains 11 material weaknesses, 7 significant deficiencies, and 5 instances of noncompliance with applicable laws and regulations. These were due to an inability to establish a compliant control environment, implement adequate financial accounting systems, retain key financial staff, and identify appropriate accounting principles and policies.

Recommendation Status Date Issued Summary
2017-FO-0005-001-A Closed March 01, 2017 Evaluate the current content of HUD’s financial statement note disclosures to identify outdated or irrelevant information that may not be needed, while maintaining compliance with OMB Circular A-136 and presenting the reader with the information necessary to understand HUD’s financial statements.
2017-FO-0005-001-B Closed March 01, 2017 Work with FHA and Ginnie Mae to reevaluate the note consolidation process to determine changes that can be made to the process to ensure compliance with financial reporting requirements.
2017-FO-0005-001-C Closed March 01, 2017 Reassess HUD’s current consolidated financial statement and notes review process to ensure that (1) all reviewers have sufficient financial reporting experience; (2) it includes steps to verify that the notes match HUD’s financial statements, are sufficiently supported, and accurately include FHA and Ginnie Mae information; and the review can be completed within the required timeframe needed to allow for audit.
2017-FO-0005-001-D Closed March 01, 2017 Develop a plan to ensure that restatements to HUD’s consolidated financial statements are properly reflected in all notes impacted by the restatement.